Kammoora v James

[2024] NSWSC 1490

Supreme Court

New South Wales

Medium Neutral Citation:

Kammoora v James [2024] NSWSC 1490

Hearing dates:

7 November 2024

Date of orders:

7 November 2024

Decision date:

21 November 2024

Jurisdiction:

Equity - Succession & Probate List - Probate

Before:

Slattery J

Decision:

Opinion given under Trustee Act1925 (NSW), s 63. Defendant trustee’s costs to be paid out of the estate on the indemnity basis.

Catchwords:

SUCCESSION — Administration of estates – judicial advice – Trustee Act1925 (NSW), s 63 – deceased’s will divides his property among his four children after appointing one of those children, the defendant, as his executor – delay by the defendant in the administration of the estate due to a dispute in relation to subdivision of the deceased’s real property and other matters – the plaintiff, a beneficiary applies for removal of the defendant – Court appoints an independent administrator but temporarily stays the orders – in June 2024 the Court declines to give judicial advice to the executor to accept an offer for $850,000 for one of the estate properties but upon terms that the plaintiff must indemnify the estate against the shortfall arising from a lower offer being received later – offer for $850,000 not renewed and an offer for $785,000 made – whether judicial advice should now be given over the plaintiff’s objection that the defendant would be justified in accepting the offer for $785,000 – other issues have arisen in relation to the administration of trusts of works of art created by the deceased – what directions should be given to resolve those other issues and to further the better administration of the estate.

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 60

Probate and Administration Act 1898 (NSW)

Trustee Act1925 (NSW), s 63

Cases Cited:

Macedonian Orthodox Community Church St Petka Inc v Bishop Petar (2008) 237 CLR 66; [2008] HCA 42.

Texts Cited:

M Evans, T Power and J Power, Equity and Trusts, Fifth Edition, LexisNexis, Australia 2024.

Category:

Principal judgment

Parties:

Bessie Kammoora (Plaintiff)
Oliver James t/a executor of the Estate of Ross Frederick Woodcock (Defendant)

Representation:

Counsel:
H Morrison (Plaintiff)
R Bianchi (Defendant)

Solicitors:
Matthew Jones of Steindls Lawyers (Plaintiff)
Asheetha Jelliffe of Bridges Lawyers (Defendant)

File Number(s):

2023/00321882

Publication restriction:

N/A

JUDGMENT

1. The Australian artist, Ross Woodcock (“the deceased”) died on 22 February 2018. His estate comprising works of art and the real property surrounding his studio at Exeter in the Southern Highlands of New South Wales is still being administered over six years later. This delay is unreasonable and offends ordinary standards of what is acceptable in the administration of estates under the Probate and Administration Act 1898 (NSW).

2. The plaintiff in these proceedings, Bessie Kammoora, is one of the deceased’s four children and a beneficiary of the estate. The defendant/executor, Oliver James is another of the deceased’s children and another beneficiary of the estate.

3. The plaintiff was rightly concerned about the defendant’s failure to administer the estate efficiently. The delay was so lacking in objective justification that, on 28 June 2024, the Court made orders at the suit of the plaintiff, removing the defendant as executor. The Court replaced the defendant with an independent professional administrator, Mr Benjamin Dornan. But the Court stayed those orders temporarily to give the defendant an opportunity to adhere to an agreed timetable to administer the balance of the estate.

4. That timetable has slipped. Some explanation for the slippage of the timetable has been provided. But the immediate issue before the Court is the executor’s application for judicial advice under the Trustee Act1925 (NSW), s 63 concerning the sale of a parcel of the deceased’s real estate. This issue arises directly out of the Court’s orders of 28 June 2024 (“28 June Orders”).

5. Proceedings were relisted in the Equity Duty List pursuant to the liberty to apply granted with the 28 June Orders. Mr H Morrison of counsel instructed by Mathew Jones of Steindls Lawyers appeared for the plaintiff. Ms R Bianchi of counsel instructed by Asheetha Jelliffe of Bridges Lawyers appeared for the defendant. Ms R Bianchi moved orally for the judicial advice.

6. The Court will deal with the judicial advice issue first and then address broader questions relating to the current state of the general administration of this estate. But first some background is required about the deceased and his estate.

The Estate of the Late Ross Woodcock

7. The deceased was survived by his four children, the defendant, Oliver James, the plaintiff, Bessie Kammoora, Daniel Woodcock and Joshua Woodcock.

8. The scheme of the deceased’s will dated 22 December 2015 was straightforward. The will appointed the defendant is his executor and made the following gifts:

1. a legacy of $100,000 to his good friend Anna Perston,

2. the establishment of the Woodcock Fine Art Trust (“the Woodcock Trust”) for the executor to hold the deceased’s works of art, and

3. the residue of the estate was to be divided among his four children in equal shares in testamentary trusts but with the discretion of the beneficiaries to receive their entitlements outright.

9. Probate was granted to the defendant on 1 May 2018. This grant was timely being only 10 weeks after the death of the deceased. But delays in administration of the estate soon took hold.

10. The defendant filed an inventory of the property of the estate which disclosed the following:

1. two parcels of real estate at 574 and 576 Ellsmore Road, Exeter with an estimated value of $1.9 million;

2. money in various bank accounts to the value of $906;

3. two motor vehicles with an estimated value of $31,280;

4. shares in several private companies with a nominal value for dollars; and

5. artworks of the deceased which were vested in the Woodcock Trust, which executor estimated to have a market value of $10,000.

11. Thus, at the time of the deceased’s death the gross value of the estate was sworn by the executor at $1,942,186.03. The plaintiff disputed the correctness of this estimate of the value of the deceased’s assets at the time of his death. The inventory shows that the estate was illiquid.

12. The estate was still being administered in October 2023 when the plaintiff filed her Statement of Claim in these proceedings seeking a revocation of the grant of probate to the defendant and a grant of letters of administration with the will annexed either to herself or to Mr Benjamin Dornan as an independent administrator.

13. The matter was case managed by Lindsay J as Probate Judge in the last quarter of last year. Lindsay J ordered on 1 December 2023 that the grant of probate be deposited with the Court, which occurred on 6 December 2023. I became Probate Judge for the first six months of 2024 and took over the case management of the proceedings, making detailed orders on 28 June 2024.

14. The Court’s 28 June Orders were designed to bring the issue of delay to a head and place the defendant on a tight timetable to complete the estate’s administration, otherwise the stay on Mr Dornan’s appointment would be lifted.

15. The contest between the plaintiff the defendant up to June 2024 about the delay in the administration of the estate is partly explained by their differing views about maximising the value of the estate.

16. The defendant sought to justify the delay. His claimed justification was that estate administration had been impeded by the subdivision of the Ellesmore Road property from the existing two lots into four lots. The defendant executor was of the view that subdivision would realise more value for the estate than selling the property as two lots. The plaintiff disagreed that subdivision is necessary. The defendant said that many factors associated with the subdivision and outside his control had led to the delays, including processing subdivision documents at the local Wingecarribee Shire Council, the flooding of the land, travel restrictions due to the Covid 19 pandemic, and other delays caused by surveyors, engineers, and other building contractors in relation to necessary subdivision works.

17. The plaintiff answered the defendant’s justification of the delay, submitting that there had been lengthy periods of time during the administration of the estate where the defendant had done nothing and had not followed up third parties with sufficient vigour in the interests of the estate to drive the subdivision project forward. By the time the matter came before the Court in June 2024 the subdivision had been largely completed and the four lots were finally able to be marketed separately.

18. But even if the defendant’s view about the correct method for maximising value of the estate is accepted, the delay was unacceptable. That is why on 28 June 2024, the Court appointed Mr Dornan but stayed his appointment pending the defendant showing that he could administer the estate pursuant to an agreed timetable.

19. The orders the Court made on 28 June 2024 were structured around the making of an agency agreement for the sale of the four lots and their submission to auction in early August 2024, followed by a further auction after a period off market if the properties did not sell at the first auction.

20. The 28 June Orders required an auction of the Ellsmore Road properties to be held by 10 August 2024. And if they were passed in at that auction the orders provided for a second auction to take place before 5 October 2024. By the time the 28 June Orders were made, the defendant had received an offer for 570 Ellsmore Road of $850,000. The plaintiff did not consent to the defendant accepting that offer. The position taken by the plaintiff in declining to take the offer was based upon a valuation of 570 Ellsmore Road at more than $850,000. The defendant wished to accept the offer.

21. The Court resolved this disagreement on 28 June 2024. As part of the orders made on that day, the Court noted the disagreement about accepting the offer for 570 Ellsmore Road and imposed a mechanism to allow the plaintiff to require the defendant to take further time to seek a higher offer. But if the offer was not renewed, non-acceptance at that time might result in loss to the estate. The Court took account of the plaintiffs’ dissent from the course being proposed by the defendant and did not then give judicial advice to the defendant that he would be justified in exchanging contracts for 570 Ellsmore Road at the offered price of $850,000. But to protect the estate from loss the Court required the plaintiff to indemnify the estate against any shortfall in the ultimate sale price of 570 Ellsmore Road from the offer of $850,000 (Order 13 of the 28 June Orders).

22. The reasoning behind this was to allow the plaintiff to back her own judgment that a higher offer could be obtained, but at the price of compensating the estate if her judgment was not vindicated. The operation of this order has led to the present dispute to which these reasons now turn.

The Judicial Advice

23. The executor/defendant seeks judicial advice that he would be justified in accepting the present offer and exchanging contracts for the sale of 570 Ellsmore Road at $785,000. The plaintiff/beneficiary was heard in opposition to the course proposed by the defendant.

24. The applicable legal principles in relation to the giving of this judicial advice are fully set out in the decision of the High Court in Macedonian Orthodox Community Church St Petka Inc v Bishop Petar (2008) 237 CLR 66; [2008] HCA 42 and in textbooks such as M Evans, T Power and J Power, Equity and Trusts, Fifth Edition, LexisNexis, Australia 2024 [37.48] to [37.54]. Those principles need not be reproduced in this judgment.

25. The facts are not in issue. The four properties in the completed subdivision have been individually marketed. One of the four, a property other than 570 Ellsmore Road, has already sold for $850,000 which will shortly improve the liquidity of the estate.

26. Several offers had been made for 570 Ellsmore Road, which had all come from owners of adjoining properties. The offer of $850,000 that was extant at the time of the 28 June Orders had not been renewed, despite the two marketing campaigns since June 2024 and the two auctions. No other buying interest in 570 Ellsmore Road has emerged. An offer for 570 Ellsmore Road has now been made for $785,000. Three of the four beneficiaries support accepting the offer for $785,000. The plaintiff is the only beneficiary that dissents from that proposed course.

27. The advice from the real estate agent retained by the defendant is that he has negotiated the offer from the potential purchasers up from $740,000 to $785,000. Those potential purchasers only have finance approved for the purchase at $785,000 until 12 November 2024. That is why the defendant has sought to exercise the liberty to apply and sought urgent judicial advice on 7 November. The real estate advice to the estate is that the market might change and improve by about mid-next year but there is no certainty about that.

28. The plaintiff put four main arguments as to why the requested judicial advice should not be given. These arguments are set out below followed by the Court’s reasons for not finding each of these arguments persuasive.

29. First, the plaintiff points out that 570 Ellsmore Road has been valued as recently as August this year at between $900,000 and $1 million. Mr Morrison submits on the plaintiff’s behalf that although there may not have been any buyer interest in the property in the short term its value has been established and the defendant would not be justified in accepting an offer $115,000 below the lower margin of the valuation range.

30. Valuations must meet market conditions. The lack of third-party offers for 570 Ellsmore Road after two marketing campaigns since June, would allow a prudent executor in the position of the defendant to question the valuation range, rather than to hold out for an offer within the valuation range.

31. Secondly, the plaintiff argues that the agent’s advice does not suggest that future upside in the price that will be obtained for the 570 Ellsmore Road is not available. The agent does not say that this is the best offer that can be obtained over time. The plaintiff therefore says that an offer within the valuation range should be received if the defendant waits longer.

32. An executor acting prudently would not assume that real estate will continue to attract offers at ever-higher levels. The reverse is possible and waiting longer may produce only lower offers depending on market conditions. It is reasonable for a prudent executor to seek certainty for the beneficiaries. This is especially so in circumstances where the sale timing and sale price of the two other properties is still uncertain.

33. Thirdly, the plaintiff submits that in the context of this estate, where there has already been regrettable delay since 2018, waiting another six months for an offer should not be regarded as a significant burden in the estate’s administration. There are no pressing factors relating to the estate’s administration about the health or welfare of the beneficiaries that require acceptance of the offer now rather than waiting another six months.

34. In the Court’s view, the delay that has occurred in the administration this estate is not an argument for further delay. The executor could reasonably take the view, as he has, that an opportunity to sell at this price should be taken now. This is especially true where an offer for $850,000 was allowed to pass and has not been renewed.

35. Fourthly, the plaintiff submits that because apart from 570 Ellsmore Road there are still two other properties to be sold, it would be logical to remarket 570 Ellsmore Road while the other two properties are being marketed. This would then allow time to get a better price for 570 Ellsmore Road.

36. But the executor would be prudent in judging that the more properties that remain unsold the more that any one property may delay finalisation of the estate and that the risk exists of securing a lower rather higher price than $785,000 for 570 Ellsmore Road in the future. That risk might be mitigated by the plaintiff underwriting any further shortfall in the sale price of 570 Ellsmore Road. But the executor would be justified nevertheless in taking the view that the need to advance the overall administration of the estate is now a pre-eminent consideration.

37. In the Court’s opinion, the executor will be justified in exchanging contracts for 570 Ellsmore Road for $785,000 on or before 12 November 2024.

38. In accordance with accepted principle, the executor should have his costs out of the estate for the present application. The plaintiff has been unsuccessful. She should bear her own costs. But her bringing the application was not unreasonable and she should not be required pay the defendant’s cost of the application.

39. A result of this judicial advice is that the plaintiff will have to meet the shortfall of $65,000 resulting from the defendant not proceeding with the original offer of $850,000. That is reflected the orders below. There is only one circumstance in which this outcome may be revisited. If the purchasers offering the $785,000 for 570 Ellsmore Road are the same as the purchasers offering the $850,000, as appears to be the case, and the purchasers do not ultimately proceed with exchanged contracts for $785,000, the plaintiff may have a reasonable argument to vary the underwriting of the $65,000. If the purchasers do not proceed with the smaller purchase, they may well not have proceeded with the more expensive purchase and it would be unfair for the plaintiff to be required to underwrite a larger transaction that was unlikely to have occurred or been completed. But if the $785,000 transaction proceeds, the Court will not entertain a variation of the $65,000 by which the plaintiff has underwritten the estate.

Other Estate Administration Issues

40. The present application has allowed the Court an opportunity to review the general state of the administration of this estate. Several features of that administration to date require comment.

41. On 31 July 2024, the Court ordered that the plaintiff’s and the defendant’s costs of the proceedings up to that date be paid out of the estate each on the indemnity basis. Following the hearing on 7 November 2024, the parties agreed upon the quantum of those costs at approximately $75,000 for each party and those quantified costs orders are made with this judgment.

42. But costs have continued to be incurred by these parties after 31 July 2024 apart from the cost of the present application. The plaintiff's recent evidence generally shows a lack of confidence in the defendant's administration of the detail of this estate in relation to the papers, accounts, and artworks of the deceased which has necessitated further negotiations between the parties. One view of the contests evident in the recently filed affidavit evidence is that there has been very poor communication between the defendant and the plaintiff in the recent administration of the estate. This unsatisfactory situation cannot be allowed to continue.

43. These disputes have now been partly resolved on an interim basis at least by the agreement reflected in Orders (4) to (7) below. But whether the steps taken under that agreement have been successful or not in resolving all remaining issues between the parties should become evident shortly after 21 November 2024. If there are continuing disputes about the papers, accounts, and artworks of the deceased and what assets belong to the Woodcock Trust, then the parties should relist these proceedings for the Court to make further directions and orders to promote finalisation of the estate.

44. If the hostility between the parties remains intractable it may be necessary for the Court to reconsider lifting the stay on appointing Mr Dornan as an administrator of the estate. That stay is only temporary and can be lifted at any time if the Court loses confidence in the executor’s administration of the estate. That administration should be focused upon the best interests of all the beneficiaries, whose interests in the estate the executor must deal with impartially, reasonably, and efficiently.

40. Alternatively, a Court expert may be able to be appointed under Uniform Civil Procedure Rules, r 31.46 to take control of some of the paperwork and assets of the estate. The court expert could be appointed to determine what assets should be allocated to the Woodcock Trust and what assets should remain in the estate under the control of the executor. The parties should understand that this issue will not be allowed to drift.

41. This leads to residual costs issues in respect of costs after 31 July 2024 that are not related to the present application for judicial advice. It is important that the parties not waste costs on exchanges of correspondence and argument about these costs, a matter which the Court can readily determine so there is one less issue at stake in the administration of this estate. If the parties wish to resolve any remaining costs questions to advance the administration of the estate such matters can be dealt with on or before the next scheduled directions date of 5 February 2025.

42. The Court will not permit extensive argument about costs, or the incurring of substantial costs in arguing about costs. That is contrary to the precepts of Civil Procedure Act 2005, s 60, which requires the expenditure of costs to be “proportionate to the importance and complexity of the subject matter in dispute”. If the matter is relisted for this purpose the Court would only permit short oral argument based on a skeleton written outline of no more than two pages.

Conclusions and Orders

48. For these reasons, the Court makes the following orders:

1. Orders that the Defendant as Executor of the estate of the late Ross Frederick Woodcock (the Estate) is justified in exchanging Contracts of Sale in relation to the property at 570 Ellsmore Road Exeter, NSW for a sale price of $785,000.

2. Orders that pursuant to Order 13 made on 28 June 2024, the Plaintiff pay $65,000 to the Estate.

3. Orders that pursuant to Order 15 made on 28 June 2024, the payment in Order 2 be deducted from the Plaintiff's entitlement from the Estate.

4. Notes the undertaking of the Defendant to deliver an electronic copy of all the documents relating to Gunya Shelters, Forged Iron Art, photographs and other business records as set out in Annexure A to these Orders, to the Plaintiff on or before 21 November 2024.

5. Notes the undertaking of the Defendant to deliver the original sketches that form part of "Box 1" and "Drawers" as set out in Annexure A to these Orders, to the Plaintiff on or before 21 November 2024.

6. Orders the Defendant to deliver an electronic copy of all the documents relating to Gunya Shelters, Forged Iron Art, photographs and other business records as set out in Annexure A to these Orders, to the Plaintiff on or before 21 November 2024.

7. Orders the Defendant to deliver the original sketches that form part of "Box 1" and "Drawers" as set out in Annexure A to these Orders, to the Plaintiff on or before 21 November 2024.

8. Notes Order 2 made on 31 July 2024 and Orders that the Plaintiff's costs be paid out of the estate in the agreed sum of $75,417.78.

9. Notes Order 3 made on 31 July 2024 and Orders that the Defendant's costs be paid out of the estate in the agreed sum of $75,960.76.

10. Orders that the Plaintiff bears her own costs of and incidental to the hearing on 7 November 2024.

11. Orders that the costs of the Defendant of and incidental to the hearing on 7 November 2024 be paid or retained, as the case may be, out of the estate of the deceased.

12. Grants liberty to any party to apply for consequential and ancillary orders, with three days' notice.

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Decision last updated: 21 November 2024